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Noting that no other court has had a case that was “on point,” a federal judge has clarified that increasing underinsured motorist policy limits constitutes a “purchase” requiring the insurer to offer a new stacking waiver.

U.S. District Judge Gerald McHugh of the Eastern District of Pennsylvania in Barnard v. The Travelers Home and Marine Insurance denied the insurance company’s motion for summary judgment.

Plaintiff Michelle Barnard originally signed a written waiver of stacked benefits when she purchased her two-vehicle policy, leaving her UIM policy limit at $50,000 per person. She later increased her policy limit to $100,000 per person but was not offered a waiver, according to McHugh’s opinion.

Barnard was subsequently injured in a car accident and filed a claim for UIM coverage, after which Travelers paid out $100,000. Barnard did not accept the payout and argued that stacked limits were available.

McHugh said the case hinged on the definition of “purchase” in the context of stacked coverage. He added that the governing statute, Section 1738 of the Pennsylvania Motor Vehicle Financial Responsibility Law, used the plain meaning of the word.

“In common usage, to purchase means to buy—to acquire something by paying for it,” McHugh said. “Travelers contends that the transaction should be characterized as an ‘alteration’ of limits, but that ignores the fact that plaintiff here paid for a level of UIM insurance that was different from what she had previously purchased, and for which she paid a different and higher premium. As an insurance ‘product,’ the May 2009 policy was distinct from the May 2007 version that preceded it.”

He added, “The question then becomes whether case law applying the statute compels a different result. Although the issue is a close one, I am not persuaded that the language of the statute can be ignored when the transaction in question specifically involved a change in UIM coverage as compared to some other aspect of the policy. The parties acknowledge that there is no case directly on point, and argue by way of analogy. I am convinced that such case law as there is favors a literal reading of Section 1738 in this context.”

Travelers argued that such an interpretation would have negative consequences on the insurance marketplace, but McHugh disagreed, noting that the only evidence Travelers submitted was a brief from the state insurance commissioner submitted in another case in 2010.

“I am hard-pressed to conclude that conditions in the marketplace at that time shed meaningful light on conditions prevailing today, and Travelers does not attempt to explain how a decision in Bernard’s favor would portend widespread disruption,” McHugh said. “The buying and selling of automobiles is a major engine of commerce and such a frequent occurrence that policies are drafted in recognition of that fact.”

Erik Snyder of the Snyder Law Group in King of Prussia represents Barnard.

“Fortunately, Judge McHugh saw through the twisted logic of the insurance company and decided this matter in favor of our client, entitling her to ‘stack’ her UIM coverage,” Snyder said. “We hope this decision will help other injured persons get the coverage that they have paid for and lawfully ‘purchased.’”

Brooks Foland of Marshall Dennehey Warner Coleman & Goggin represents Travelers and declined to comment.